An Empirical Study On The Relationship Between Dividend Distribution Of Listed Company And Institutional Investor Shareholding

After the split share structure reform of China’s capital market, the financing function of the market had been rebuilt, the private placement of listed companies has gradually become the mainstream model of refinancing. After the promulgation of "the Implementation of Listed company Securities Issuance"(hereinafter referred to as "the Implementation ") from SRC (Security Regulatory Commission) in May2006, and the promulgation of "the implementation details of listed companies in private placement"(hereinafter referred to as "the implementation details") in September2007, the private placement had been in hot pursuit of the listed companies. Since8th May2006when "the Implementation" was promulgated to the end of2011, a total of692listed companies implement private placement, we can see the private placement become a mainstream refinancing model of in post-reform China’s capital market. Compared to the public issuance and allotment, the law requirement of private placement is low and there are no specific requirements on the company’s profit, and the issue size would not be restricted hardly as the allotment. In addition, SRC hold a more positive attitude towards the private placement compared with other refinancing model. On the other side, private placement creates a way letting institutional investors improving their shareholding proportion in listed companies. At this environment, the institutional investors gradually played a more important role in the supervision and governance of listed company.At present stage, the researches of the relationship between dividend of listed companies and institutional investors shareholding (selling-out) behavior is not much, and scholars didn’t study this relationship specially based on the private placement event. Under this condition, this thesis will study this relationship uniquely based on the unlocking of shares of private placement. The main purposes of this study are listed below:First, testing whether the attending institutional investors take the dividend distribution of listed company as an important consideration when them sell-out the shares of private placement. The result of this test can explain whether the institutional investor exist a preference to the stock paying dividend.Second, testing whether institutional investors "shareholder activism" which is an important corporate governance mechanism played a significant role of corporate governance at the perspective of the dividends distribution.the main content of this thesis is divided into five parts:The first part is the introduction of the research background (institutional investors, dividend policy, and private placement), the purpose, significance, innovation of this research, and papers framework.The second part involved in some basic concepts, theory of this research. First, we introduced the basic situation of dividend policy and institutional investors. Subsequently we analyzed the relationship between institutional investors and dividend policy within the MM theory, dividends agency theory; dividends signal theory and the idea of "shareholder activism". Then we get a comment combing through the research results on domestic and foreign literature. This paper concluded that:(1) In accordance with the agency theory of dividends, the dividends distribution can reduce agency costs of listed company, which represent a good corporate governance structure. In the same time, in accordance with the dividend signal theory, the dividend distribution will help improve the reliability of accounting earning information. Therefore, dividend distribution indicates that the value of listed company will be improved in the future. Under this logic, institutional investors should hold more preference on the stock paying higher dividends.(2) In accordance with the idea of "shareholder activism" analysis and existing study results, in order to fulfill its fiduciary responsibility institutional investors own the motivation and ability to play a more important role in the supervision and governance of listed company, while promoting listed companies to distribute dividends is an obvious way.The third part is the design of empirical research.First, we get two study assumptions under the analysis above. Assumption1: if listed company distributed higher dividend in the lock period of private placement, the institutional investors would sell-out less shares them hold after the unlocking of shares. Assumption2:if institutional investor held much more shares in the lock-up period of private placement, the listed company would distribute more dividends in the lock period of private placement.Then we build two regression models to finish this empirical test.The fourth part is the analysis of empirical results. The results show that the selling-out ratio of institutional investor after the unlocking of shares significantly negatively correlates with the dividend level of listed company. At the same time, the empirical results also show that the institutional investor shareholding proportion had no significant effect on the dividend distribution of listed company in the private placement lock-up period. In addition, as a surprise, we find that the discount size of private placement and market portfolio performance significantly affect selling-out ratio of institutional investor after the unlocking of sharesThe fifth part states the conclusions of this study. First, we study the relationship between the institutional investor shareholding (selling-out) and the dividend distribution of listed company uniquely based on the private placement, which is an absolutely new method. And we find the dividend distribution will affect the behavior of institutional investor significantly. Second, we find that the shareholding proportion of institutional investor didn’t affect the dividend distribution of listed company in the private placement lock-up period.